As an emerging power with global aspirations, India must first befit a regional power

Within just six months in power, Narendra Modi has managed to induce a dramatic overhaul of India’s hitherto muffled and ill-defined foreign policy, and has dramatically increased his country’s global profile. Successful summits with the BRICS grouping (Brazil, Russia, India, China and South Africa), Japan, China, Nepal and Bhutan were topped off with a high-profile visit to the United States (US) from 27-30 September. Modi’s US visit was his most interesting foreign trip: barred from entry to the US for nine years because of accusations over his role in the Gujarat massacre of 2002, the red carpet to the White House was rolled out. Modi received a ‘rockstar’ reception in the US, especially from Americans of Indian origin, for example addressing 18,000 people at Madison Square Gardens in New York.

Unlike his predecessors, Modi has underscored foreign policy as a priority from the beginning alongside a strong mandate to put India’s economy in order. Modi aspires to re-invigorate India’s emerging power status, which suffered in recent years due to poor economic growth. He has not only injected focus and ambition into India’s foreign policy, but also linked it directly to his plan to transform India’s economy. Launched in September 2014, ‘Make in India’ has become Narendra Modi’s signature programme as he aspires to convert India into a global manufacturing hub. His foreign policy mantra therefore is strongly driven by geoeconomics – especially attracting foreign direct investment (FDI) – and at the same time seeks to consolidate India’s leadership role in South Asia. While the previous Congress party led governments prioritised relations with the US and the European Union (EU) (the Singh government negotiated the historic US-India nuclear energy agreement from 2005-2008 and launched free trade talks with the EU in 2007), Modi is shifting the focus to India’s immediate neighbourhood and other major Asian countries like Japan, China and Australia, as well as the BRICS grouping.

Modi has a personal penchant for foreign policy and, unusually, had undertaken numerous foreign visits (especially to China and Japan) while Chief Minister of Gujarat, an Indian state. Modi’s foreign policy mixes uber-pragmatism with business acumen. He has managed to convince both China and Japan to invest heavily in India while reestablishing India’s foothold in its precarious immediate neighbourhood. Reaffirming India’s traditional non-aligned policy, Modi has employed a more muscular approach to asserting his country’s independence while taking a very selective approach to multilateral cooperation. For example, India singularly vetoed the World Trade Organisation’s (WTO) Trade Facilitation Agreement (TFA) in July (a draft already agreed by the WTO’s 160 members including the previous Congress-led Indian government at the Bali Ministerial Conference in 2013) over food security concerns. A breakthrough was reached in the fringes of the Asia Pacific Economic Cooperation (APEC) Summit in November, when the US agreed not to challenge India’s food security policies at the WTO, removing the main impasse to the agreement. With the US, Modi has steered clear of joining any US grand strategy on Asia or the Islamic State (IS) in Iraq and Syria, but spoke during his visit there about trade, investment and bilateral security cooperation.

India’s Immediate Neighbourhood

As an emerging power with global aspirations, India must first befit a regional power. Modi’s first major decision after securing power was to extend an unprecedented invitation to South Asian Association for Regional Cooperation (SAARC) leaders for his swearing-in ceremony, despite opposition in India from certain state leaders and political party allies. Modi wishes to emphasise New Delhi’s role in India’s immediate neighbourhood and to revive SAARC, a role long neglected by New Delhi. This move not only confirmed India’s acceptance of its responsibility as a regional leader, but was also the first sign of a shift in Indian foreign policy.

On his first day in office, Narendra Modi held successful bilateral talks with Pakistani Prime Minister (PM) Nawaz Sharif. The last major breakthrough in Indo-Pak relations transpired under the previous Vajpayee-led BJP coalition (1998-2004) with the Sharif government, a development which Modi seeks to emulate. By initially holding out the olive branch to Sharif, Modi not only coaxed the latter to reciprocate, but also set Pakistan’s democratic apparatus against its anti-Indian military establishment and intelligence agency who opposed Sharif ’s trip to India. However, prior to his election, Modi had promised to take a tough stand on Pakistan.

When Pakistani High Commissioner to India, Abdul Basit, met Kashmiri separatists in August (a policy tolerated by previous Congress-party governments in India), India called off scheduled foreign secretary talks a week before they were to take place. Modi drew his first red line on Pakistan.

Bilateral talks were also held with all other SAARC leaders. Symbolically, Modi’s first foreign visit was to neighbouring Bhutan in June, and in August he became the first Indian PM to visit Nepal in 17 years, where he offered a $1 billion line of credit for infrastructure development and energy projects. In June, Foreign Minister Sushma Swaraj travelled to Dhaka. Bangladesh is a key neighbour that can help India to better connect with its geographically isolated north-eastern territories, curb India-focused Islamic terrorism, and counter China’s growing influence in the Bay of Bengal.

The drawdown of US and NATO troops from Afghanistan will leave behind a major regional power vacuum which Modi seeks to fill. By taking a lead as the largest country in SAARC, India is looking to set the rules for the region, which is home to nuclear-armed arch rival Pakistan, and is increasingly susceptible to Chinese influence. In recent years, the Chinese strategic footprint in India’s neighbourhood has deepened, in particular via investments in commercial ports in Pakistan, Sri Lanka, Bangladesh, and Burma/Myanmar. These are, however, perceived suspiciously by Indian hawks as a ‘string of pearls’ aimed at encircling India and containing its expansion, whilst also monitoring India’s naval activities. While these ports remain commercial for the moment, China’s deepening of relations with India’s neighbours through military and economic assistance and high-profile infrastructure projects is the real concern. For example, some three-quarters of China’s arms exports are sold to three of India’s South Asian neighbours: Bangladesh, Burma/Myanmar and Pakistan.

Engaging East Asia

The centrepiece of Modi’s East Asia manoeuvrings is his China-Japan waltz. Modi shares a personal bond with both Japan and Japanese PM Shinzo Abe. Modi travelled twice to Japan as Chief Minister of Gujarat – Japan did not follow the US and Europe with travel bans on Modi following accusations over his role in the 2002 Gujarat massacre. Modi is one of only four people that Abe follows on twitter (in addition to Indian Home Minister Rajnath Singh), and during Modi’s five-day visit to Japan in August-September, he was received in Kyoto with a bear hug from the usually stiff Japanese PM. During that visit, Japan elevated its relationship with India to a ‘special global strategic partnership’ and pledged $35 billion in investments in Indian infrastructure and energy development, besides doubling its FDI over the next five years.

A bullet train or Shinkansen project worth $10 billion and an agreement on joint production of rare earths were also announced (India holds around 2.2 per cent of the world’s rare earth reserves). Although a much-anticipated nuclear energy agreement was not signed, energy cooperation and military ties were significantly strengthened. Both countries also agreed to establish a ‘two-plus-two’ security arrangement bringing together foreign and defence ministers, hold regular maritime exercises, and that Japan would continue to participate in Indo-US military drills. In Tokyo, Modi also condemned the ‘vistar vaad’ or expansionist tendencies of ‘some countries’ who ‘engage in encroachments and enter seas of others’ – a veiled reference to Chinese territorial expansionism.

Although India has its own border dispute with China, Modi is not anti-Chinese. He travelled to China four times before becoming PM to woo investments into Gujarat. There too, like Japan, he was received with the honours proffered to a head of state. Modi is an admirer of Chinese development and feels at ease amongst Beijing technocrats. On one of his visits, he not only carried red business cards printed in Mandarin but declared that ‘China and its people have a special place in my heart’. Chinese Foreign Minister Wang Yi travelled to India soon after Modi’s election while Modi met Chinese President Xi Jinping at the BRICS Summit held in Brazil from 14- 16 June 2014. Xi Jinping concluded a three-day visit to India landing in Ahmedabad (Modi’s hometown) on 17 September, Modi’s 64th birthday. The visit was highly symbolic and marks the beginning of greater Chinese investments in India – China has invested only $400 million in India in the last decade, compared to the €26.8 billion FDI stock Beijing held in the EU by the end of 2012 according to the European Commission. Xi is the first Chinese president to visit India in eight years and brought along a delegation that included around 135 Chinese business leaders. Twelve agreements were signed in all. China pledged to invest $20 billion in Indian infrastructure and manufacturing sectors, agreed to build high-speed rail links and construct two industrial parks in the Indian states of Gujarat and Maharashtra. The visit also saw the twinning of commercial capitals Mumbai and Shanghai as well as Ahmedabad with Guangzhou. In addition, a five-year economic and trade development plan was agreed, and greatly welcomed in New Delhi given India’s large trade deficit with China (some $36.2 billion of a total trade of $66 billion in 2013).

One hallmark of Modi’s nascent foreign policy has been his ability to attract both China and Japan to invest in India without agitating either. However, Modi is also wary of China in some respects. To counter China’s new ‘Maritime Silk Route’ which would link Europe to China via the Indian Ocean, Modi will soon launch a new foreign policy initiative, ‘Project Mausam’. Following the pattern of seasonal monsoons used by ancient Indian sailors, Mausam will stretch from East Africa to Indonesia, proffering India robust control over the Indian Ocean by deepening links with littoral states. For example, India has recently stepped up defence cooperation with the Maldives and Sri Lanka (following Xi’s visit to these countries before travelling to India), while four Indian warships are currently stationed on a two-month term off the coast of East Africa and the Southern Indian Ocean.

Since 2008, India hosts an Indian Ocean Naval Symposium (IONs) every two years, with the aim of enhancing naval cooperation among 35 Indian Ocean littoral states, and this Symposium can be expected to be further developed under Modi.

Furthermore, Modi will not shy from potential disputes with China. During Xi’s India visit, Indian President Pranab Mukherjee purchased seven new oil and gas blocks from Vietnam in an area of the South China Sea disputed by both China and Vietnam. India has also offered Vietnam a $100 million line of credit to buy patrol boats. Foreign Minister Swaraj has stated that if India should recognise the One-China policy, China should also recognise the One-India policy, referring to the territories of Aksai Chin, Arunachal Pradesh and Trans-Karakoram Tract disputed by India and China.

Modi’s India has pursued a renewed engagement in the rest of Asia too. Swaraj has travelled to ASEAN (Association of Southeast Asian Nations) countries to boost India’s profile there, while in the Middle East (where roughly 7 million Indians live) she oversaw the return of 46 Indian expats kidnapped by the Islamic State in Iraq. In September, Modi and Australian Prime Minister Tony Abbot signed a landmark civil nuclear energy deal to enable Australian uranium sales to India in a major boost to strategic bilateral ties.

Russia, which is India’s second-largest arms supplier and a major nuclear fuel supplier, is also looking to build a $40 billion gas pipeline to India. Russia is also eager to divert some of its funds from Europe to infrastructure in India. In March, India abstained along with rest of the BRICS countries from voting on a UN Resolution on the territorial integrity of Ukraine, and objected to the suggestion of Australia, Chair of the G20, to disinvite Russia from the G20 November 2014 Summit.

Whither the West?

Modi has had a relatively colder relationship with the West, soured mainly because of his ostracism by the US and European governments following the Gujarat massacre in 2002. His recent visit to the US therefore was more a personal victory lap for him than a revolutionary moment for the Indo-US relationship.

At the White House, Modi and Obama discussed ways the US and India could repair their rocky relations. The landmark Indo-US nuclear agreement inked during the Bush administration in 2005 has been held back by Obama. Furthermore, Obama also pushed India to speak with Pakistan to resolve the Kashmir issue during his trip to India in 2010, a suggestion not appreciated by many Indians – especially at a time when India was waiting for Pakistan to persecute perpetrators of the Mumbai 2008 attacks. The ‘defining relationship of the 21st century’ that President Obama spoke of during the same visit has not yet happened.

The US has also been critical of India’s stalling of the WTO’s TFA in July. The TFA would drop trade barriers and import duties across its membership, adding an estimated $1 trillion to global Gross Domestic Product (GDP). Modi is certainly keen on economic growth, but was concerned about India’s ability to provide subsidized staple food for its poor (this US-India impasse was overcome at the APEC Summit in November). Discussing a host of prickly issues, both leaders agreed to renew their defence cooperation for 10 years and spoke of trade and investment especially in India’s defence sector. The US has recently become the top arms exporter to India.

Europe has so far been ignored in Modi’s foreign travel itinerary. Many European leaders including the UK deputy prime minister and the French and German foreign ministers have visited Modi in India this year with billions of dollars’ worth of deals in tow. Already France is India’s third-largest arms supplier, Germany is India’s top trading partner in the EU and the UK and India are negotiating a civil nuclear cooperation agreement. But Modi’s reciprocity has been lukewarm. No visit was scheduled in 2014 to Europe although a trip to Germany is now on the agenda for early 2015. Visits to the UK, France or the
Nordic countries, may also be likely during 2015 (Sweden and Denmark were the first countries to reach out to Modi in 2008 when their Ambassadors met him in Gujarat, while the UK hosts a huge Indian diaspora). If anything, Modi can be expected to strike interest-based partnerships with European countries rather than pursue high-profile ties like the previous government. In October, for instance, Indian President Pranab Mukherjee travelled to Finland to sign a key nuclear cooperation pact.

Relations with the EU, however, are likely to further deteriorate as Modi may prefer to engage individual EU member states than the EU institutions. EU-India relations have remained dormant for some time now due to low levels of engagement. Bilateral visits from the EU remain limited and the annual EU-India Summit has not been held in 2014 (or 2013) despite ten years of the EU-India strategic partnership (signed in 2004) and the golden jubilee of relations (established in 1964). Modi also did not attend the biennial Asia-Europe Meeting (ASEM) Summit held in October in Milan. The EU-India FTA under negotiation since 2007 is nowhere in sight, and the Modi government is likely to renegotiate parts of the FTA or lower its overall ambition. In September, Commerce and Industry Minister Nirmala Sitharam stated that ‘the government wants to enter into such deals on its terms and if necessary, start all over again’.

EU-India engagement on foreign policy remains a blind alley. Cooperation on civil nuclear energy at EU level has been limited due to a lack of consensus among EU governments. On the research side, however, India and EURATOM have entered an agreement on fusion energy research in 2009 and an agreement on civilian nuclear energy research is under negotiation and may be signed next year. In all of this, cooperation on urbanisation seems a particularly promising avenue for engagement. The EU remains relatively absent from India’s infrastructure sector, a top priority for Modi, but could become the entry platform for its 28 member countries to the vast Indian infrastructure market. The EU already has a pre-existing model for cooperation on sustainable urbanisation with China that promotes exchanges and cooperation between a large number of European and Chinese stakeholders. Launched in September, Modi’s signature project ‘Make in India’ aims to transform India into a manufacturing hub and could well accommodate European high-speed railways, world-class infrastructure and technology which all have a large potential market in India. By tapping into Modi’s ‘Make in India’ project, an EUIndia urbanisation partnership could help re-launch a wilting strategic partnership.

Conclusion

India is recalculating its geostrategic approach. Relations with Japan, China, Russia and Australia are gaining importance in relation to those with the US and the EU, traditionally considered priority strategic partners. Asia, beginning from the immediate neighbourhood out, is likely to be the main geographic focus of Modi’s foreign policy. Without a restructuring of the international economic architecture to reflect contemporary realities, India will aggressively pursue multilateralism through alternative platforms like the BRICS.

The EU needs to factor Modi’s priorities into reshaping its engagement to India, such as foreign direct investment and infrastructure, or else it is likely to be overlooked in New Delhi. As for the US, India will reject any ‘American-led alliances’, be it in the Middle East against Islamic terrorism or in Asia against China.

Modi may push at the boundaries of India’s long-held non-aligned policy, but the defining framework of his foreign policy will be corporate-style geo-economics. Modi believes that India is an emerging global power, and therefore first needs a solid economic base. Economic remodelling at home will govern India’s foreign policy leaning, and those with dispensable cash will be prioritised.

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